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The Importance of Insuring your Exports/Imports

Written on the 15 June by Famous Logistics

Damage or complete destruction of imported/exported goods during transportation is unfortunately a very real risk that importers/exporters face. The truck may overturn, the goods may be damaged during loading or unloading, or your package may fall overboard. Famous Logistics recommends importers and exporters always take out insurance. We chatted with Ian Macnaughtan from E.D.I. Cargo Cover to find out what insurance options are available.

According to Ian, the most important point he stresses to all importers and exporters is what is known as the General Average. If any mishap occurs to the vehicle that is carrying their goods and the shipping line declares General Average to the vessel, then the shipper (the importer or exporter) is responsible for their portion of any repairs or salvage incurred in saving the vessel.

Ian also wanted to point out that, if by some chance exporters/importers purchase FOB (Free On Board), it is the responsibility of their supplier to insure the goods until they pass over the ships rail (when it is being loaded onto the ship.)

“In these circumstances, proving where any loss occurred is very hard, and any recovery from their supplier can be a drawn out affair and may not succeed,” he said.

According to Ian, his company works under The Institute Cargo Clauses, a standard set of London marine Market Clauses detailing the extent of cover provided by insurers. They have been traditionally used by all insurers since their introduction in January 1982.

“Marine Cargo Insurance covers all forms of transit and all types of commodities and interests. Import and /or export cargo and inland transit of goods by sea, road, air, rail and post are all encompassed under the name of Marine Cargo Insurance,” he said.

Ian explained that there are a number of coverage clauses available, depending on what type of protection the importer/exporter requires, taking into account the risks faced, and ran us through the following clauses.

The Institute cargo Clauses (A) is the widest of cover available, covering ‘all risks of loss or damage’ to the subject matter insured, except for exclusions such as, among others, war and strikes, insufficiency or unsuitability of packing and delay or loss of market. Ian stressed that importers/exporters need to remember that there must be a risk of loss, not a certainty of loss.

The next clause down the scale is Institute Cargo Clauses (B) which is not an ‘all risks policy’, rather quite a limited policy, which covers, among other things, fire or explosion, the overturning of the carrying vessel, the collision of the vessel, plus the entry of sea, lake or river water resulting in damage to the goods, as well as total loss of any package lost overboard or dropped whilst loading or unloading.

Another clause with further limited coverage is the Institute Cargo Clauses (C), which covers the same risks as the (B) Clause mentioned above, with the exception of earthquake, volcanic eruption or lightning, entry of sea, lake or river water, and total loss of packages lost overboard or dropped whilst loading or unloading.

The Institute Cargo Clauses (Air) has exactly the same risks clauses as the Institute Cargo Clauses (A).

Ian explained that the main circumstances not covered in any of the clauses are, generally speaking, loss, damage or expense proximately caused by delay, and loss, damage or expense caused by insufficiency or unsuitability of packing or preparation of the subject matter insured.

“The other thing that the clauses do not cover is loss, damage or expense caused by the eventuation of what is called an inherent vice, with an example being the rotting of fruit or the rusting of steel,” he said.

Ian advised that all importers/exporters look into the type of coverage each clause provides and seek expert advice.

“If an importer/exporter suffers loss of any description and is not covered by a Marine Coverage insurance policy, they will be wholly responsible for the loss and expense that results,” he said.